GoldPrice.

Good morning, traders. Welcome to our regular Monday preview of the week ahead, focusing on the macroeconomic data and market narratives most likely to have an impact on gold prices, as well as the markets for the Dollar and other typically correlated assets.

Gold prices are trading a few dollars below last night’s global market open, at time of writing. Following a brief pop higher as US equity markets initially took a step back, gold prices are under pressure once again, in part due to another Monday beginning with weakness in the oil market.

Alongside the macroeconomic calendar this week, we will of course be tracking the continued slow rollback of coronavirus restrictions and looking out for any reflexive spike in cases. Also, on our radar remains last week’s flare of trade tension between the US and China.

US Economic Data to Watch

Tuesday, May 12 at 8:30am EDT // Consumer Price Inflation (Apr)

[consensus exp. (core): +1.7% YoY // prev.: +2.1%]

[consensus exp. (headline): +0.4% YoY // prev.: +1.5%]

The clear trend from last week continues tier-one economic data that showed weakness at the very start of the US’ coronavirus lockdown in the March data is set for a crash in April’s numbers. Core CPI looks set to fall frustratingly below 2% due to the deflationary impact of the economic shutdown, with big-ticket prices in the travel category being the “hardest” hit while rent freezes and other landlord discounting in the commercial real estate space will begin to pass-through as well.  The alcohol category, surprising no one, will probably see some demand-driven inflation. In headline number, as we’ve seen for most of 2020, the collapse in energy prices (oil) will force a much more dramatic drop with analysts calling for a pullback of more than 1% YoY.

Thinking about the gold price reaction, I can’t talk myself in to putting CPI in the same category of monthly labor market data that seemed to rock the market last week when very little else has had an impact. As long as the inflation read doesn’t come in markedly worse than expected I think we may see the usual jitters from algo-trading but little lasting pressure. A beat in the data on the other hand, particularly the core number holding above 2%, could spark some risk appetite in US markets that drives gold lower.

Wednesday, May 13 at 8:30am EDT // Producer Price Inflation (Apr)

[consensus exp.: -0.5% MoM // prev.: -0.2%]

Being focused on the manufacturing sector of the US economy, producer prices are again expected to reflect a sharper pullback than Tuesday’s consumer-focused variant. As I reminded above, the turmoil in the oil markets, passing through to energy prices, will put the biggest dent in PPI inflation while the general weakness in “core” prices won’t help. In terms of the expected prints, now is not the time for PPI to have any considerable impact on gold or Dollar markets; but if there were to be worse trouble in the industrial sector than expected, this is where we would likely see some of the first warning signs.

Thursday, May 14 at 8:30am EDT // Initial Jobless Claims

[consensus exp.: +2,500k // prev.: +3,169k]

The downward slope remained in place last week, but we didn’t quite crack below 3 million new unemployment claims; hopefully we cross that threshold this week. April’s dismal jobs report was something we’ve known to expect for more than a month, but with some US states attempting to phase out of the lockdown already May is much more of an unknown right now and one that we’ll start sketching out as the 4-week trend for jobless claims evolves. This could mean a rise in the volatility of gold and US Dollar prices around the weekly release. If we (very roughly) model that based on the moves around last week’s labor market data, a sudden move higher in Initial Jobless Claims could be expected to push safe haven flows into the Greenback while also gold. It’s certainly not the correlation we call “typical,” but it’s very much the one in play near-term.

Friday, May 15 at 8:30am EDT // Retail Sales (Apr)

[consensus exp. (headline): -11.7% MoM // prev.: -8.4%]

[consensus exp.: (core): -4.2% MoM // prev.: +2.0%]

Retail numbers can be assumed to follow the same steep March-April drop as other key US economic metrics, maybe more so as the push from March stockpiling will cycle out of the April numbers. There aren’t any surprises here; retail businesses have been many of the most damaged sectors by the forced lockdowns in major metro areas. As we’ve seen with a lot of the April data though, that assumption of gloomy data probably limits the impact its release will have on safe havens like gold. The one caveat being this: it’s assumed that the chaos of the coronavirus lockdowns rolling out in March muted the participation of retailers in the collection of data, so Friday’s revision could severely dent last month’s initial reporting, providing some degree of lift to gold and other safe havens.

Friday, May 15 at 8:30am EDT // NY Empire State Manufacturing Index (May)

[consensus exp.: -60.0 // prev.: -78.2]

Last month’s Empire State survey was our first sign of regional manufacturing data coming in much worse for April than expected. The hope is for moderation in May, but I’m not holding my breath just yet. Regardless, Friday morning is an off-pattern release for this data set so I’m not expecting it to get much attention or market impact being mixed in with month Retail reporting.,

Friday, May 15 at 10am EDT // Univ. of Michigan Consumer Sentiment (May)

[consensus exp.: 68.0 // prev.: 71.8]

Last month’s steep drop in consumer sentiment is expected to slow this time, but the downward trend will continue. As has been the case in recent months, the declining data could add a risk-off tailwind to gold prices to end the week but, given that it will come so late in the morning, may be negated just as quickly be end-of-the-week profit-taking.

FedSpeak this Week

The scheduled appearances by Federal Reserve officials come thick and fast this week, with the Chairman’s planned mid-week comments “the state of the economy” drawing the most attention. Our focus, and that of the market in general, will be on refining the understanding of relevant FOMC members’ outlook for a post-crisis recovery: it should be useful for any investor to construct their own outlooks, but it will also help us roadmap potential (if not probable) moves from the Fed into the medium-term. With last week’s FedSpeak ranging from very cautious optimism to outright warnings, I expect this week’s commentary to fall within the same range.

Monday, May 11: Atlanta Fed President Raphael Bostic (non-voter) (12pm EDT)

Tuesday, May 12: Minneapolis Fed President Neel Kashkari (FOMC voter) (9am); St. Louis Fed President James Bullard (non-voter) (9am); Philadelphia Fed President Patrick Harker (FOMC voter) (10am); Fed Vice Chair Randall Quarles (FOMC voter) (10am)

Wednesday, May 13: Federal Reserve Chairman Jerome Powell (9am)

Thursday, May 14: Minneapolis’ Kashkari (1pm EDT)

Global Economic Data to Watch

Elsewhere in the world this week, the key data released in Europe will be the first look at Q1 GDP in the UK (on Wednesday) and some core EU economies (on Friday,) as well as a revision to overall Eurozone GDP (also Friday.) I expect them to be mostly low-impact for gold and the Dollar this week, but the last weeks have seen more considerable movement in gold prices during the European trading session before New York logs in, so be aware of any big surprises. We’ve been told to expect a release of the new EU joint budget proposal which will include an outline of fiscal stimulus to combat the current economic crisis, but we’ve also been told that could easily be delayed to next week.

Asia’s economic docket is fairly light this week. An update on Japan’s economic growth is scheduled for release on Sunday evening, New York time.

And that’s how the calendar lines up for us over the next five trading days. As always, I wish you health and the best of luck in your markets this week. I’ll see everyone back here on Friday for our weekly market wrap.